Correlation Between Addus HomeCare and CyberArk Software

Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and CyberArk Software at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Addus HomeCare and CyberArk Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Addus HomeCare and CyberArk Software, you can compare the effects of market volatilities on Addus HomeCare and CyberArk Software and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Addus HomeCare with a short position of CyberArk Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and CyberArk Software.

Diversification Opportunities for Addus HomeCare and CyberArk Software

-0.02

Correlation Coefficient

Addus HomeCare  CyberArk Software

Good diversification

The 3 months correlation between Addus and CyberArk is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software and Addus HomeCare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Addus HomeCare are associated (or correlated) with CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and CyberArk Software go up and down completely randomly.

Pair Corralation between Addus HomeCare and CyberArk Software

Assuming the 90 days horizon Addus HomeCare is expected to under-perform the CyberArk Software. In addition to that, Addus HomeCare is 1.03 times more volatile than CyberArk Software. It trades about -0.14 of its total potential returns per unit of risk. CyberArk Software is currently generating about 0.09 per unit of volatility. If you would invest  30,720  in CyberArk Software on December 1, 2024 and sell it today you would earn a total of  3,480  from holding CyberArk Software or generate 11.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  CyberArk Software

Addus HomeCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CyberArk Software

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CyberArk Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Addus HomeCare and CyberArk Software

The main advantage of trading using opposite Addus HomeCare and CyberArk Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, CyberArk Software can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CyberArk Software will offset losses from the drop in CyberArk Software's long position.

The idea behind Addus HomeCare and CyberArk Software pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.